CBP Transforming U.S. Trade

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1 WHITE PAPER CBP Transforming U.S. Trade What Importers need to know about the latest trade transformation efforts from the CBP s Centers of Excellence and Expertise and how to prepare for the transition.

2 Introduction The United States ability to compete on the global stage recently fell for the fourth year running, according to the World Economic Forum s Global Competitiveness Report. 1 The report, which assesses the competitiveness of 144 economies, is considered the most comprehensive assessment of national competitiveness worldwide. This year, the Netherlands and Germany moved ahead of the U.S., with the U.S. s ranking dropping two places to seventh. As part of an effort to improve U.S. economic competitiveness, U.S. Customs and Border Protection (CBP) has undertaken several trade transformation efforts over the last few years. The overarching goal of these efforts is to improve efficiencies for both CBP and the trade community and to transform customs procedures to align with modern business practices. A key initiative of this effort was the introduction of the Centers of Excellence and Expertise (CEE) in CEEs were introduced in an effort to reduce costs for both businesses and the government by streamlining trade processes and comprehensively enforcing U.S. trade laws. The CEEs essentially provide one-stop processing for the trade community using a team of industry-focused CBP experts located virtually nationwide. The approach, according to CBP, will increase uniformity of practices across ports of entry, facilitate the timely resolution of trade compliance issues nationwide, and further strengthen critical agency knowledge of key industry practices. CBP kicked off a test period for the CEEs on July 3, The test will conclude in three years. While participation in the test program is currently voluntary, experts predict CBP s move to the CEE methodology is significant and likely to have long-reaching effects. For those importers that choose to participate in the test, the transition is expected to present both benefits and challenges. This white paper examines some of the changes participating importers and brokers may experience and expectations for the future. 1 The Global Competitiveness Report, World Economic Forum, , global-competitiveness-report /

3 How the CEEs Work The CEEs will fundamentally transform the way CBP approaches trade operations and how it works with the international trade community. Before the CEEs, CBP utilized an accounts-based approach to managing customs. Large importers had a direct liaison with one individual at CBP, which was more efficient than dealing with multiple port directors. The CEE approach replicates the account management strategy but centralizes it around commodities rather than the importer s physical location, bringing all of CBP s trade expertise to support a single industry in a strategic virtual location. Each CEE is staffed with numerous trade positions using account management principles to facilitate trade authoritatively. By having the CEEs focus on industry-specific issues, CBP is able to provide tailored support to unique trading environments. There are three primary goals of the CEEs. The first is to facilitate legitimate trade through effective risk segmentation. This includes the utilization of account-based methods to process trade, an effort to expand partnerships by moving more importers to trusted trader status, and to develop and implement comprehensive strategies to manage risk. The second goal is to increase industry-based knowledge within CBP, engage industry groups and key stakeholders, and to bring all of CBP s expertise to bear on a single industry in a virtual environment. The final goal is to enhance enforcement and address industry risks by increasing overall port security, leveraging industry to identify issues of mutual interest to provide CBP with targeting, enforcement, and/or intelligence information, and to coordinate these efforts by industry to address unique risks. October 2011 CBP announced two industry-specific centers: the Center of Excellence and Expertise Electronics in Los Angeles and the Center of Excellence and Expertise Pharmaceuticals in New York. May 10, 2012 CBP announced the Automotive and Aerospace CEE in Detroit, Michigan, and the Petroleum, Natural Gas & Minerals CEE in Houston, Texas. November 27, 2012 CBP announced six new CEEs: the Agriculture and Prepared Products CEE in Miami, Florida; the Apparel, Footwear and Textiles CEE in San Francisco, California; the Base Metals CEE in Chicago, Illinois; the Consumer Products & Mass Merchandising CEE in Atlanta, Georgia; the Industrial & Manufacturing Materials CEE in Buffalo, New York; and the Machinery CEE in Laredo, Texas.

4 CEEs Locations CBP examined data on the volumes of commodities coming into each port in order to determine where to headquarter each CEE. For example, data revealed that the majority of pharmaceutical products move through the port of New York, so CBP headquartered the pharmaceutical CEE in New York. While importers can still import pharmaceuticals utilizing other ports, the documents associated with those moves are reviewed and overseen by specialists at the CEE in New York. CBP introduced two CEEs in October 2011 (Electronics in Los Angeles and Pharmaceuticals in New York); two more in May 2012 (Automotive and Aerospace in Detroit and Petroleum, Natural Gas and Minerals in Houston); and the last six in November 2012 (Agriculture and Prepared Products in Miami, Apparel, Footwear and Textiles in San Francisco, Base Metals in Chicago, Consumer Products and Mass Merchandising in Atlanta, Industrial and Manufacturing Materials in Buffalo, and Machinery in Laredo. Pharmaceuticals, Health Chemicals New York, NY Specializes in pharmaceuticals, healthrelated equipment, and products of the chemical and allied industries Machinery Laredo, TX Specializes in tools, machine tools, production equipment, instruments, or similar industries Industrial & Manufacturing Materials Buffalo, NY Specializes in plastics, polymers, rubber, leather, wood, paper, stone, glass, precious stones and precious metals, or similar industries The Centers have been assigned unique team codes for identification purposes. These codes will serve as the primary indicators to process a particular entry summary or postsummary activity belonging to a Center. Agriculture & Prepared Products Miami, FL Specializes in agriculture, aquaculture, animal products, vegetable products, prepared foods, beverages, alcohol, tobacco or similar industries 003 Automotive & Aerospace Detroit, MI Specializes in automotive, aerospace, or other transportation equipment and related parts industries 004 Apparel, Footwear & Textiles San Francisco, CA Specializes in wearing apparel, footwear, textile mill, textile mill products, or similar industries Consumer Products & Mass Merchandising Atlanta, GA specializes in household goods, consumer products, or similar industries and mass merchandisers of products typically sold for home use Base Metals Chicago, IL Specializes in steel, steel mill products, ferrous and nonferrous metal, or similar industries Electronics Los Angeles, CA Specializes in information technology, integrated circuits, automated data processing equipment, and consumer electronics Petroleum, Natural Gas & Minerals Houston, TX Specializes in petroleum, natural gas, petroleum related products, minerals, and mining industries

5 What it Means to the Importer The process flow for entry and entry summary will not change under the CEE approach. However, the location of CBP processing for post-release aspects of shipments will move from ports of entry to the appropriate industry CEE. For example, an electronics importer may import through six ports of entry today, with post-release processing done at each location. Once the CEEs are fully staffed and have necessary trade functionality, such processing will be handled by one CEE (Los Angeles in this case), leading to greater efficiency and improved uniformity in decision-making. Revenue collection will continue to be carried out at the ports of entry as done previously, but the CEEs will perform all validation activities, protest review, post entry amendment/post summary correction reviews, and prior disclosure validations for the participants within their industries. The scope and functions will expand incrementally until all revenue related functions eventually reside in the CEEs. While the CEEs are industry focused, they are also account based. Importers whose imports cut across multiple industries, or who may import products that fall outside of their industry, will be assigned to the CEE that best represents their business. The assigned CEE will be the primary point of processing for the participating importer for all entries, regardless of the commodity that is entered. CEEs will collaborate to resolve issues for importers that cross industry assignments. In this way, importers can truly be managed by account. CBP s goal is to incrementally transition the operational trade functions that traditionally reside with the ports of entry until they reside entirely with the CEEs. Importers will not need to change where they import because the CEEs are virtual. CBP will leverage technology to bring the work to the CEEs, regardless of where the importation occurs. Therefore, importers should continue to use the ports of entry that best meet their individual business needs.

6 Who Participates In August 2012, as part of an effort to further the operational development of the CEEs, CBP issued a Federal Register Notice seeking volunteers from the importing community to participate in the CEE. Though the test period has now officially started, CBP will continue accepting applications and will notify volunteer participants in several phases as the CEEs continue to grow and develop. For inclusion in the CEE, applicants must be part of the respective industries CBP has identified, with the highest percentage of their entries comprised of related merchandise. In the initial phase of the test, priority consideration for participation was given to importers enrolled in the Customs-Trade Partnership Against Terrorism (C-TPAT) program as Tier 2 or Tier 3 members, and members of the Importer Self-Assessment (ISA) program. However, CBP has now relaxed that requirement, and importers interested in participating no longer need to be C-TPAT or ISA participants to apply. Participants in any CEE must, however, have an Automated Commercial Environment (ACE) portal account. Participants and filers are strongly encouraged to make full use of existing automated tools and systems such as ACE for transmission of entry summaries, the ACE portal for transmission of supporting documentation, and the Document Image System for transmission of invoices. Full guidelines for participating are available at CBP.gov. Upon acceptance into the test and CBP transitioning such processing to the respective CEE, the following processes will change for test participants: Requests for entry cancellations must be submitted electronically to the CEE; Census resolution processes will be handled by the CEE; therefore, rejected Automated Commercial System (ACS) entry summaries must be electronically transmitted to the CEE s address, unless other arrangements have been made with the CEE to resolve Census issues; Timely responses to Requests for Information (CBP Form 28) and Notices of Action (CBP Form 29) must be sent directly to the CEE; Requests for Internal Advice must be submitted electronically to the CEE for further coordination with Regulations and Rulings, Office of International Trade; Protests must be filed via the electronic protest module in ACS (including a note in the filing that designates the CEE team), or submitted electronically on a scanned copy of the CBP Form 19 with all supporting documents to the CEE via the ACE Portal or the CEE s address.

7 Benefits of the CEE Approach The primary advantage of the CEE approach is account centralization and streamlining of the documentation process. Importers using multiple ports who participate in CEE will no longer be subject to differing port-specific procedures for post-entry adjustments or protests. The CEE can successfully resolve issues with all 329 ports of entry for the participating importer, providing importers the benefit of a direct line of communication for post entry interactions. The approach is expected to save both time and money, as the CEEs can better manage workload and ensure consistency. The change will primarily benefit large importers that regularly use multiple ports. The CEEs will also serve as an industry resource to the broader trade community and to CBP s U.S. government partners. Regardless of whether they chose to participate in the test, importers of all sizes can access the CEEs as a ready source of information on CBP requirements and best practices related to a particular industry. This will enable CBP to work effectively with other agencies to reduce delays that can be solved by collaboration. As the CEEs grow in size and scope, CBP will seek to find opportunities to integrate them further into the One U.S. Government at the Border approach. An additional anticipated benefit will be the CEEs ability to better inform and significantly contribute to these efforts based on expanded knowledge of industry practices.

8 The Role of the Broker CBP recognizes that brokers are essential partners not just for the CEEs, but for all of CBP s trade transformation efforts. They have therefore encouraged broker participation. The nature of the role allows brokers to create a valuable link between the importer and the CEEs. Ideally, the broker should act as a compliance partner for the importer of record. The broker can also help the importer anticipate and prepare for impending changes and challenges. This type of intermediary role will become more important as other government agencies begin to centralize their activities. In June, the U.S. Food and Drug Administration (FDA) announced it would conduct a Centralized Entry Review Pilot to run from August 12, 2013 through November 4, In an effort to improve efficiency and review of entries, the FDA will require that any entry documents they request be submitted to them electronically, thus improving the review efficiency of the entries. Ultimately, centralization is the future, and businesses that start to consider how they will rearrange their processes to prepare for it will be further ahead tomorrow. What Happens Next? CBP plans to conclude the CEE test in July Following that, it is unclear whether the program will become mandatory. Some experts in the logistics field believe CBP will use the test period to examine how the CEEs function and may shift CEE locations based on lessons learned, but likely will not change the overall approach. CBP may not necessarily formalize the CEE approach, but will simply continue the CEE philosophy and assign importers to their respective CEE based on the merchandise they import going forward.

9 Conclusion Some importers have expressed concern over CBP s move to the CEE approach. One such concern involves forgoing existing positive working relationships with local CBP contacts to move to a system where the importer must work with an unknown contact in a distant city. Collaborating with a broker may help ease the transition as brokers have relationships at key ports, importers may benefit from piggybacking on those established affiliations. The brokers position uniquely intertwined between the importer and the CEEs, means they are an integral part of the program and can help importers navigate changes and adjustments more efficiently. Overall, the benefits of the CEE program appear worthy of the efforts. The program is expected to reduce transaction costs for importers and ensure greater consistency and predictability in dealings with CBP. Additionally, importers enrolled in the program will receive the direct benefits of centralized processing, and the trade community at large will benefit from the concentrated industry knowledge and expertise of the CEE personnel. The CEEs are also expected to minimize the burden on importers to educate CBP personnel on their particular products and will eliminate unnecessary follow-up. Further, the CEEs will increase overall port security by allowing ports of entry to focus CBP resources on highrisk shipments and importers. This increased focus is expected to result in improved revenue protection, reduced economic loss due to intellectual property rights theft, and enhanced overall port safety. Ultimately, the move to the CEE approach is about maintaining and hopefully improving the United States global economic competitiveness.

10 About Geodis Wilson and the Geodis Group In the U.S., Geodis Wilson is equipped with a dedicated team of experts in Customs Brokerage and Compliance with the knowledge and proficiency to support importers in better understanding and transition to CBP s CEE program. Acting as a compliance partner and your one broker at the border, Geodis Wilson has established offices in each of the major CEE cities, allowing importers to collaborate with this transition. We also help our clients obtain C-TPAT certification, we can assist with ACE portal setup, we are active with the National Customs Brokers & Forwarders Association of America, and employ a significant number of Certified Customs Specialists and Export Specialists. Around the world, Geodis Wilson is a leading global freight management company serving their clients with integrated supply chain solutions that deliver cargo by sea and air. With employees in more than 50 countries the company delivers tailor-made, integrated logistics solutions to customers enabling them to operate as best in class. Geodis Wilson is the freight-forwarding arm of Geodis Group which became part of the French rail and freight group SNCF in With its employees in 60 countries SNCF GEODIS ranks among the top 7 companies in its field in the world. For more information contact us at info@us.geodiswilson.com or call us at C U.S. Highway 1 South, Suite 410, Iselin, NJ Geodis Wilson USA, Inc. All Rights Reserved

Trade Transformation. CBP Initiatives for 21 st Century Trade. September 2012

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